Consequences and/or Remedies for Late or Missing Form 5500s

The Form 5500 deadline is approaching quickly. Below, Employee Benefits Corporation discusses the three different options employers have if they fail to file their Form 5500 or if they file late.

The Form 5500 is due on the last day following seven months after the end of the plan year. In order to be granted an extension, the employer would have to send the IRS a Form 5558 for each plan subject to Form 5500 obligations. The Form 5558 needs to be postmarked by the original due date or it will be rejected.

Failure to file or failure to file required Form 5500s on time can prove to be costly for an employer as daily penalties are assessed for late or missing filings.

What should an employer do if they find out they never filed a Form 5500 or they failed to file the Form 5500 by the deadline?

The employer should consider their risk tolerance, the number of plans they have not filed and the potential penalties to determine what the best course of action is for them.

They have three options:

  1. Do not file and hope that no one questions them if they are audited. There is a potential consequence of $300/day for each plan (per plan/ per plan year) that did not get filed or get filed on time. Penalties capped at $30,000 per year.
  2. File late and hope that no one notices. There is a potential consequence of $50/day for each plan (per plan/per plan year) that filed late or not on time. No cap on the penalty in this case.
  3. File late under the Delinquent Filers Voluntary Compliance Program (DFVCP). There is late fee of $10/day for each plan (per plan per plan year) that is filing late. Penalties capped at $2,000 per large plan/$750 per small plan if filing multiple plan years for a plan. Penalties for large plans that file more than 1 delinquent plan year per plan number filing at the same time, the maximum penalty is $4,000 per plan and $1,500 for small plans.

The Bottom Line:

Employee Benefits Corporation can assist employers with the preparation of their delinquent Form 5500s as part of our Compliance Services offerings. Employers will pay the DFVCP penalties directly to the DOL online as part of the process. We can help educate the employer on the risk factors associated with each approach and to assist, if contracted to do so, in the preparation of the Form 5500s.

Employee Benefits Corporation (29 June 2018) "Consequences and/or Remedies for Late or Missing Form 5500s" [Web Blog Post]. Retrieved from

Form 5500 changes could increase obligations for plan sponsors

With proposed changes to Form 5500, small business may need to be prepared to stay in compliance as exemption statuses may change. See the article by Joseph K. Urwitz, Srarh Engle and Megan Mard fro Employee Benefit Adviser.

Historically, Form 5500 has served primarily as an information return used by plan administrators and employers to satisfy their reporting obligations under the Employee Retirement Income Security Act and the Internal Revenue Code. However, the DOL and IRS are increasingly relying on information reported on Form 5500 as a key component of their compliance and enforcement initiatives.

As a result, the proposed revisions to Form 5500 would add a number of new reporting requirements designed to aid the DOL and IRS in assessing whether an employer-sponsored health and welfare plan is being operated and maintained in compliance with the Internal Revenue Code, ERISA and the Affordable Care Act. Most notably, the revisions would limit the reporting exemption for small health and welfare plans, and require employers to disclose significantly more information about their plans in a new Schedule J (Group Health Plan Information) to the Form 5500.

Proposed changes limit exemption for small health and welfare plan reporting

Under the existing reporting regulations, employer-sponsored group health plans with fewer than 100 participants that are fully-insured, self-insured or a combination of insured and self-insured, are not required to file a Form 5500. The proposed changes would eliminate this small plan exception and would require all employer-sponsored group health plans that are subject to ERISA (including grandfathered and retiree plans) to file a Form 5500, regardless of a plan’s size or funding.

The DOL’s executive summary on the proposed regulations states that this change will improve the DOL’s effective development and enforcement of health and welfare plan regulations, as well as the DOL’s ability to educate plan administrators regarding compliance. The new reporting rules will also provide the DOL with data needed for congressionally-mandated reports on group health plans. Under the proposed rules, the existing financial reporting exemptions for health and welfare plans on Schedule C (Service Provider Information), G (Financial Transaction Schedules) and H (Financial Information) will continue to apply. Small, fully-insured plans would have a new limited exemption and would only be required to complete basic participation, coverage, insurance company and benefit information.

Changes to form 5500-SF eligibility

Currently, a welfare plan with fewer than 100 participants, including a plan that provides group health benefits, may file the Form 5500-SF if it is not exempt from the reporting requirements and otherwise eligible. Under the proposed regulations, welfare plans that provide group health benefits and have fewer than 100 participants would no longer be permitted to use the Form 5500-SF. For example, under the proposed rules, a plan funded through a trust with fewer than 100 participants would be required to complete the Form 5500 and Schedule H and Schedule C, if applicable. Welfare plans that do not provide group health benefits, have fewer than 100 participants, and are not otherwise exempt from the reporting requirements would still be able to use the Form 5500-SF.

Proposed changes require disclosure of significantly more plan information

The proposed revisions would also add a new Schedule J (Group Health Plan Information) to the Form 5500. Schedule J would require group health plans to report detailed information about plan operations and compliance with both ERISA and the ACA. For example, plans would be required to disclose, among other things:

  • The number of participants and beneficiaries covered under the plan at the end of the plan year.
  • The number of individuals offered and receiving Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage.
  • Whether the plan offers coverage for employees, spouses, children, and/or retirees.
  • The type of group health benefits offered under the plan, i.e., medical/surgical, pharmacy, prescription drug, mental health/substance use disorder, wellness program, preventive care, vision, dental, etc.
  • The nature of the plan’s funding and benefit arrangement, and information regarding participant and/or employer contributions.
  • Whether any benefit packages offered under the plan are claiming grandfathered status, and whether the plan includes a high deductible health plan, a health flexible spending account, or a health reimbursement arrangement.
  • Information regarding rebates, refunds or reimbursements from service providers.
  • Stop-loss coverage premiums, information on the attachment points of coverage, individual and/or aggregate claims limits.
  • Whether the plan’s summary plan description (SPD), summaries of material modifications (SMM) and summaries of benefits and coverage (SBC) comply with applicable content requirements.
  • Information regarding the plan’s compliance with applicable Federal laws, including, for example, the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Genetic Information Nondiscrimination Act of 2008 (GINA), the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) and ACA.
  • Detailed claims payment data, including information regarding how many benefit claims were submitted, appealed, approved and denied during the plan year, as well as the total dollar amount of claims paid during the plan year.

The DOL has generally requested comments on the new proposed reporting requirements for group health plans and has specifically requested comments on several of the proposed disclosures listed above, including the costs and feasibility of collecting COBRA coverage information and the methodology and reasonableness of collecting information on denied claims.

Next steps

The proposed revisions to Form 5500 are complex and will likely be subject to a number of changes in response to comments received by the DOL. It is clear, however, that future Form 5500 reporting obligations will require more data, more resources and be subject to increased scrutiny by Federal agencies. Employer sponsors of group health plans should begin to evaluate plan documentation and the potential new disclosures required by Schedule J to ensure that each plan sponsor will be in a position to access such information and adequately communicate the new reporting requirements.

See the original Article Posted on here.


Urwitz, J.K., Engle, S., Mardy, M. (2016, August 04). Form 5500 changes could increase obligations for plan sponsors [Web log post]. Retrieved from

U.S. Department of Labor Proposes Improvements to Form 5500

Released by the United States Department of Labor on July 11, 2016.

Form 5500 affects us all and the Department of Labor is looking for your input on the proposed revisions to the form. Below you will find the proposed revisions and some details about them. 

The Form 5500 is the primary source of information about the operations, funding and investments of private-sector, employment-based pension and welfare benefit plans in the U.S. There are an estimated 2.3 million health plans, a similar number of other welfare plans and nearly 681,000 pension plans. Covering roughly 143 million private-sector workers, retirees and dependents, these plans have an estimated $8.7 trillion in assets.

The proposed revisions are intended to:

  • Modernize the financial statements and investment information filed about employee benefit plans.
  • Update the reporting requirements for service provider fee and expense information.
  • Enhance accessibility and usability of data filed on the forms.
  • Require reporting by all group health plans covered by Title I of ERISA.
  • Improve compliance under ERISA and the Internal Revenue Code through new questions regarding plan operations, service provider relationships, and financial management of the plan.

The proposed regulations also would make improvements to the certification requirements for the limited scope audit requirements under 29 CFR 2520.103-8, and allow group health plans to use the Form 5500 to satisfy certain reporting requirements in the Affordable Care Act. The proposed changes to the DOL regulations are also needed to implement the form revisions.

“The proposed form changes and related regulatory amendments are important steps toward improving this critical enforcement, research and public disclosure tool,” said Assistant Secretary for the Employee Benefits Security Administration Phyllis C. Borzi. “The 5500 is in serious need of updates to continue to keep pace with changing conditions in the employee benefit plan and financial market sectors. We must also remedy the form’s current gaps in collecting data from ERISA group health plans.”

To read the full article from the Department of Labor, click here

IRS: Skip Form 5500’s Optional Compliance Questions

Original post

The Internal Revenue Service (IRS) recently added new questions to the 2015 Form 5500 and 5500-SF (short form) annual retirement plan returns. The Form 5500 series of returns are used by retirement plans to report the financial condition, investments and operations of the plans to the Department of Labor (DOL) and IRS.

When the new IRS compliance questions were originally introduced, the IRS described the questions as optional for plan year 2015. However, in its most recent instructions, the IRS has specifically advised plan sponsors not to complete these questions for the 2015 plan year.

The IRS decision to delay completion is due to privacy and misreporting concerns raised by retirement plan administrators and advisors.

The new compliance questions are intended to aid the IRS in determining whether a retirement plan, such as a 401(k) plan, is in compliance with applicable law—in particular, how the plan is satisfying discrimination testing and making timely plan amendments. The new questions also ask whether the plan trust incurred unrelated business taxable income and if the plan made in-service distributions, such as hardships. Specifically, the following new lines were added:

Form 5500 Annual Return (Report of Employee Benefit Plan)

Provide preparer information including name, address and telephone number.

Schedules H (Financial Informaiton) and Schedule I (Small Plan Financial Information)

Did the plan trust incur unrelated business taxable income?

Were in-service distributions made during the plan year?

Provide trust information including trust name, EIN, and name and telephone number of trustee or custodian.

Schedule R (Retirement Plan Information) – New Part VII: IRS Compliance Questions

Is the plan a 401(k) plan?

How does the 401(k) plan satisfy the nondiscrimination requirements for employee deferrals and employer matching contributions?

If the Average Deferral Percentage (ADP) test or Average Contribution Percentage (ACP) test is used, did the plan perform testing using the “current year testing method” for non-highly compensated employees?

Did the plan use the ratio percentage test or the average benefit test to satisfy the coverage requirements under Section 410(b)?

Does the plan satisfy the coverage and nondiscrimination tests by combining this plan with any other plans under the permissive aggregation rules?

Has the plan been timely amended for all required tax law changes?

Provide the date of the last plan amendment/restatement for the required tax law changes.

If the plan sponsor is an adopter of a pre-approved master and prototype or volume submitter plan that is subject to a favorable IRS opinion or advisory letter, provide the date and serial number of that letter.

If the plan is an individually-designed plan and received a favorable determination letter from the IRS, provide the date of the plan’s last favorable determination letter.

Is the plan maintained in a U.S. territory?

Form 5500-SF Annual Return (Report of Small Employee Benefit Plan)

Asks for all the information added to the Forms and Schedules above.

Were required minimum distributions made to 5 percent owners who have attained age 70½?

When plan sponsors and plan administrators are eventually required to respond to these new questions, their responses could highlight plan compliance issues of which the plan sponsor or the IRS may not have been aware, and could lead to follow-up investigations from the IRS. The new questions are helpful guidance for plan sponsors to make certain that their 401(k) and 403(b) plans are in compliance.

Follow this Record Retention Checklist

Originally posted April 23, 2014 by Paula Aven Gladych on

Qualified retirement plans are required to report and disclose certain obligations as part of the Employee Retirement Income Security Act of 1974, but what isn’t well known is that ERISA also spells out how long a plan sponsor must retain plan documents and records that support those obligations, according to Kravitz.

Kravitz, which represents Kravitz, Inc. and Kravitz Investment Services, Inc., points out that all records that support the plan’s annual reporting and disclosure requirements should be retained. All plan-related materials and records must be kept for at least six years after the date of filing an ERISA-related return or report. Records should be preserved in a manner and format that permits ready retrieval, the company said.

It is the plan administrator’s responsibility to retain these records, even if they’ve contracted with an outside service provider to produce their Form 5500 filing, Kravitz said.

The Department of Labor also requires employers to retain records that show how much benefits have been accrued by each plan participant. Here’s it’s list:

1.     Plan documents: ERISA requires that plan administrators retain the original signed and dated plan document and all original signed and dated plan amendments; a copy of the plan’s most recent IRS approval letter; and copies of Form 5500. Plan documents should be retained until the plan is terminated, Kravitz said.

2.     Supporting documents: Reports that support the plan documents also should be kept, according to Kravitz, including financial reports, Trustees’ reports, journals, ledgers, certified audits, investment analyses, balance sheets, income and expense statements, corporate/partnership income-tax returns, documentation supporting the trust’s ownership of the plan’s assets, evidence of the plan’s fidelity bond, and copies of nondiscrimination and coverage test results.

3.     Census and other data: Payroll records that determine participant eligibility and contributions should be retained, according to Kravitz. Records that establish hours of service data also must be kept to demonstrate the determination of allocations and vesting.

4.     Communications: Employers should keep copies of all communications that are provided to participants and beneficiaries

5.     Participation forms and tax reporting: Companies need to keep documents that show they have followed plan documents with participant transactions, for plan audit purposes.

6.     Duration of storage: Records should be kept for at least six years after a government filing. Kravitz recommends that employers keep these records for the life of their retirement plan. The DOL does allow electronic copies of these documents as long as they meet certain specifications.